Analysis of household income impact on packaged palm cooking oil consumption in Sumatra, Indonesia

Abstract

This study aims to quantitatively analyze the impact of increasing packaged palm cooking oil prices on different income levels. Cooking oil is a fundamental necessity in Indonesia. The factors influencing the demand for packaged palm cooking oil are analyzed using a multiple linear regression tool and demand elasticity. This study emphasizes the growing demand for packaged palm cooking oil among various income groups of households. In principle, a substantial increase in the price of a product can result in a decrease in elastic demand. The study revealed that the increase in packaged palm cooking oil prices in the Sumatra region primarily impacted low-income households. The demand elasticity indicates that all income levels exhibit in elasticity. The study suggests that an increase in the price of packaged palm cooking oil can negatively impact the welfare of communities, particularly those with lower medium incomes. This is because the demand for packaged palm cooking oil often falls short of household needs. Therefore, a government policy is required to stabilize the price of packaged palm cooking oil. One way to achieve this is to increase the amount of CPO supply in the domestic market.